Fed IT Funds Circle Drain Due to Poor Procurement Policies

It may seem like a simple thing to fix -- if the U.S. government wants more vendors to compete for contracts, just ask more companies to take part. However, those looking to reform the procurement process are running into snags that favor the status quo, and a new survey shows just how much money is wasted. A greater emphasis on open standards and boosting the role of CIOs are two possible solutions now being studied.

Federal agencies routinely pass up opportunities to improve information technology performance, and save money at the same time, by failing to seek vendor competition in the procurement process, according to a recent survey.

Federal IT professionals revealed that their agencies could save as much as US$15.8 billion per year -- about 20 percent of annual IT spending -- by being more aggressive in utilizing multiple vendors in a more competitive environment for infrastructure projects.

The survey of 208 federal specialists was conducted in January by MeriTalk, an online community of public and private sector IT professionals.

Reporting on the survey in early March, MeriTalk said that 95 percent of respondents believe there are benefits to using more than one vendor in an area of their infrastructure, and 44 percent believe that adding a vendor drives down acquisition costs. However, five percent of agencies reported that their entire IT infrastructure uses just one vendor, and another 23 percent use just two or three.

Additionally, 41 percent said their agency has not even considered introducing additional vendors into their network systems.

"The IT network infrastructure in the federal government was designed decades ago and has evolved over the last 20 years -- increasing complexity and driving up support costs along the way," Anthony Robbins, vice president of federal sales at
Brocade, told the E-Commerce Times.

Brocade supported the MeriTalk survey. "Agencies typically have been very slow to modernize their networks and this is costing them millions of dollars each year," he said.

Agencies Too Dependent

The issue of improving vendor competition also came up at a February hearing before the House Oversight and Government Reform Committee, which is investigating the management and procurement of federal IT resources.

The views of panelists who testified at the hearing, as well as information gleaned from the survey, indicate that the simple objective of seeking greater vendor competition in federal IT contracting is a complex task.

Federal law requires "fair and open competition" in the procurement process, but allows various exemptions including situations involving "single sources," "unusual and compelling urgency," and "contracts necessary in the public interest." In what may be an abundance of caution based on a concern for IT system integrity, agencies often utilize such contracting leeway. By issuing detailed technical requirements, these agencies ensure that only a few vendors -- or even just one -- can qualify for a contract.

MeriTalk reported that many agencies are "dependent by design" on a limited number of vendors, with 65 percent of respondents contending that they specify a vendor to ensure compatibility with existing infrastructure. Complexity concerns, siloed infrastructures, and testing protocols further limit agency exploration of alternatives.

Reforms Aimed to Diversify Vendors

Breaking away from the mold of vendor dependency may call for more than a cultural change within federal agencies.

"The federal acquisition regulations already require competition. We need executive or legislative mandates" said Robbins. Those mandates should focus on the use and adoption of open industry standards in IT, and on the definition of requirements in terms of features, functions and capabilities. They should also address the elimination of the term "brand name or equal" in procurement language, unless a sole source justification has been authorized.

"Proprietary technology promotes problems. Brocade believes in supporting open standards," he said. "Federal agencies need to force this adoption, and adopting open industry standards rather than proprietary protocols will do much more for federal networks than the lackluster results seen by requests for 'brand name or equivalent' purchases to be evaluated on a lowest price technically acceptable (LTPA) basis."

New mandates are not the only way to improve competitive choice. "There are a number of existing channels agencies can use to broaden their options, such as the Department of Homeland Security model with its Eagle program, or the National Aeronautics and Space Administration contract vehicle," Alan Chovtkin, vice president and counsel at the
Professional Services Council, told the E-Commerce Times.

The DHS program provides a multiple contractor program for IT offerings that can be used by all components of the department. In effect, the department creates a roster of qualified vendors, thus saving each agency within the department the task of separately searching the market. The vehicle also promotes the selection of a broad roster of diverse vendors.

As a GWAC, the vehicle is open not only to NASA but to all federal agencies, and provides a range of alternate vendors for government agencies.

An expansion of the GWAC approach was offered at the House hearing, in the course of exploring efficiency in contracting. The idea involved more centralized federal acquisition of IT on behalf of all agencies through a clearinghouse such as the General Services Administration. By exploring the market, with no technical or vendor bias, GSA could objectively seek out competitive vendors.

Even that alternative has some drawbacks. "When centralization of procurement goes too far, the result is too great a distance between the people making the acquisition decisions and those who will have to use what is bought -- often leading to delays, user dissatisfaction, and waste," Daniel Gordon, associate dean for government procurement law at
George Washington University Law School, said at the hearing. Gordon served as administrator for federal procurement policy from late 2009 to early 2012.

Change Will Be a Challenge

Another suggestion raised by Rep. Darrell Issa (R-Calif.), who chaired the House hearing, was to strengthen the role of federal chief information officers to both empower them with more IT responsibilities and provide more identifiable accountability for IT management.

However, Gordon was also cautious about that idea. "Strengthening the role of CIOs can be a good thing, but there are limits," he said at the hearing. "Moreover, there is always a risk that strengthening an agency's CIO will translate into weakening the agency's acquisition workforce, which can be harmful, particularly since acquisition professionals are often more sensitive to competition requirements."

"There is a benefit to IT management with a stronger CIO presence, but we would not favor giving the CIO too much authority in procurement," Chovtkin said. "You still need to have the professional acquisition people and the legal advisors involved."

Shedding vendor dependency, whether it is based on personal, technical and brand preferences, or concern for IT system integrity, is proving to be a formidable challenge.

"As with major weapon systems, in large IT programs it is painful, and potentially wasteful, to change contractors once you are well into performance -- even if the contractor is running over budget and behind schedule, and is underperforming," Gordon told the E-Commerce Times. That doesn't mean, however, that the status quo cannot be changed, especially in future IT infrastructure procurements.

For example, building IT systems on a periodic and incremental basis, rather than as major, multiyear one-shot projects, provides opportunities to detect flaws more quickly and to seek vendor alternatives.

"As to the problem of changing contractors when there are problems, agencies should look for ways to use more 'modular' contracting or 'chunking' of requirements, so that competition can be injected more often into the program," Gordon said. "But keep in mind the associated risk of reduced efficiency and increased cost."

"Achieving a commercial best practice of network diversity may not always be easy," added Brocade's Robbins, "but it's easy to see that agencies that have fully embraced a multivendor environment are enjoying significant benefits."

John K. Higgins is a career business writer, with broad experience for a major publisher in a wide range of topics including energy, finance, environment and government policy. In his current freelance role, he reports mainly on government information technology issues for ECT News Network.